Category Archives: Econ & Money: Mortgage Mess

The University Of Miami School Of Law Announces Foreclosure Defense Fellowships

The Law School just issued this news release:

The South Florida community is ground zero for the national foreclosure crisis. In response, the University of Miami School of Law has created Foreclosure Defense Fellowships that will enable newly minted lawyers to give free help to local residents caught in the foreclosure crisis. The School of Law is one of the first schools in the nation to create a program of this kind in response to the crisis that is sweeping the country. Recent UM graduates will acquire real-world work experience and address a serious need in the community at the same time.

The foreclosure crisis is overwhelming the Miami-Dade legal system. One in every 28 homes in Miami-Dade County is in a state of foreclosure. Last year 56,656 foreclosures were filed in Miami-Dade County alone. Almost a third involve “owner-occupied homestead property” (residential homestead mortgage foreclosures) and a very large number of owners are unrepresented. The UM Foreclosure Defense Fellows will work to fill the gaps that this legal crisis has created within the South Florida community.

“These Fellowships engage the Law School and its recent graduates in a difficult but rewarding process that serves a great public need,” said Dean Patricia D. White.

Eight UM Law graduates were the winners of these fellowships. Six fellows – Siobhan Grant, Yolanda Paschal, Matthew Weintraub, Jaclyn Gonzalez, Francisco Cieza, and Bradley Shapiro – will work for the Legal Services of Greater Miami, Inc. (LSGMI). Two additional fellows – James Duffy and Berbeth Foster — will work at the Legal Aid Service of Broward County, Inc. They will receive a limited grant totaling $10,000 in exchange for working at least three days a week for 27 weeks, commencing in early October. The fellows will receive intensive training on October 2nd at a foreclosure workshop hosted by the UM School of Law, featuring April Charney, JD ’80, a consumer lawyer and nationally recognized foreclosure defense expert. The workshop will be held at the Whitten Learning Center on the University of Miami campus from 8:00 a.m. to 5:00 p.m.

In addition, three students from the School of Law’s LL.M. in Real Property – Jessica Davis, Dushyant Amish Jethwa, and James Walter – will inaugurate a clinical track in that program by providing 15 hours per week of free foreclosure defense representation. The LL.M students will work under the supervision of local lawyers who also will be working without pay. These fellows will be placed at “The Foreclosure Project,” created by Richard Burton, JD ’74, which provides free legal representation to homeowners facing foreclosure in Dade and Broward counties.

UM law professor A. Michael Froomkin describes how he came to create the Foreclosure Defense program: “Last fall, I was standing in front of the courthouse one evening talking to a local lawyer who was telling me about the thousand of foreclosure cases stacking up in the judges’ chambers, many with unrepresented parties who had valid defenses that were not being made because they didn't have a lawyer.” Froomkin recalls that the lawyer stated, “‘Someone should do something.’ And, right there, I decided that if no one else would do it, that it would be me.”

About Legal Services of Greater Miami

Legal Services of Greater Miami, Inc. provides innovative, effective legal services to help thousands of individuals in Miami-Dade and Monroe counties each year, creating a positive impact on the community as a whole. LSGMI is the largest provider of broad-based civil legal services for the poor in Miami-Dade and Monroe counties, and is recognized in the state and in the nation as a model legal services law firm. Its diverse staff provides clients with legal services in three languages from its main, regional and neighborhood offices.

According to Carolina Lombardi, LSGMI Senior Attorney who oversees the Mortgage Foreclosure Defense Project, “There is an unprecedented need for legal assistance for homeowners facing the loss of their homes through foreclosure and we cannot help everyone who asks for our assistance. Legal Services of Greater Miami, Inc. is thrilled to have recent UM law school graduates working with us so that we can provide legal help to more homeowners.”

Despite being staffed by six full time staff attorneys, LSGMI is only able to represent a fraction of the low income home owners in Miami-Dade County who are facing the loss of their family home. The addition of the University of Miami School of Law Mortgage Foreclosure Defense Fellows will expand the number of low income homeowners LSGMI is able to assist while at the same time training new attorneys to address this serious community need.

About Legal Aid Service of Broward County

Legal Aid Service of Broward County, Inc. (LAS) has provided free civil legal services to the poor in Broward County for over 35 years. In 2005, a regional office in Collier County was opened to serve the civil legal needs of the disadvantaged population in Collier County. Despite having an experienced, culturally diverse staff of 60, including 21 attorneys in Broward County, LAS can only meet the needs of 40% of the clients who seek their help.

“In Broward County, we have seen over a 600% increase in foreclosure case filings since 2006,” said Legal Aid Service of Broward County, Inc. Director of Advocacy Shawn Boehringer. “Even before the foreclosure crisis, we had insufficient resources to address foreclosures. We certainly have not seen a 600% increase in funding to assist clients since 2006. We applaud Professor Froomkin and UM Law School for starting this pilot and we are looking forward to working with the talent they have provided us. UM is a great law school, and our clients will benefit tremendously from the assistance the fellows will provide.”

Posted in Econ & Money: Mortgage Mess, Law: Practice, Miami, U.Miami | 6 Comments

Foreclosure Miami

Here’s a Google map of the foreclosure mess in Miami .

Each red dot is a property either in foreclosure or in pre-foreclosure proceedings.



More info on how it was put together at Healdsburg Housing Bubble Info

(spotted via Calculated Risk, Google Maps Shows Foreclosure Status)

Hours of schadenfreude potential. Or counting your blessings.

Posted in Econ & Money: Mortgage Mess, Miami | 4 Comments

Stark Foreclosure Data for 2009

Via EYE ON MIAMI, some stark numbers on foreclosures in Miami-Dade county:

In the first 4 months of this year we have had 25,577 foreclosures in Miami Dade County. That is almost as many as we had the entire year in 2007 (26,391) and more than 3 times as many as we had the entire year in 2005 (7,829). During the same 4 months in 2008 we had 16,248 foreclosures, and ended 2008 with 56,656 total. If we keep up with the current trend, we will close 2009 with more than 75,000 foreclosures. If you add all the foreclosures between 2002 and 2007 (6 years) the total is 79,812. We could possibly reach that mark in one year!

Which is why doing something is so important….

Posted in Econ & Money: Mortgage Mess | 7 Comments

International Trade? We Used to Do That

With the appropriate and evocative title of Glurk!, Brad DeLong gives us three very striking graphs of imports, exports, and the trade deficit.

It's a little hard to tell, but they're all cliff-diving, and each appears down by about a third in the last six to nine months.

Posted in Econ & Money: Mortgage Mess | Leave a comment

DeLong: Geithner’s Way or Mad Max

Playing the role of semi-official spokesman, Brad DeLong makes the case for the Geithner Plan. At its core, it's the second argument I described in Obama's Vietnam?. Here's DeLong:

Q: What if markets never recover, the assets are not fundamentally undervalued, and even when held to maturity the government doesn't make back its money?

A: Then we have worse things to worry about than government losses on TARP-program money—for we are then in a world in which the only things that have value are bottled water, sewing needles, and ammunition.

Why does the taxpayer have to put up 97% of the money in the form of non-recourse loans, but get only 83% of the upside?

A: The private managers put in $30 billion, but the Treasury puts in $150 billion—and so has 5/6 of the equity. When the private managers make $1, the Treasury makes $5. If we were investing in a normal hedge fund, we would have to pay the managers 2% of the capital and 20% of the profits every year; the Treasury is only paying 0% of the capital value and 17% of the profits every year.

One point for DeLong and Geithner: the taxpayer getting 83% of the upside — if any — is much better than the 0% first rumored.

But the core assumption behind the Geithner Plan, which DeLong endorses, is this: that the so-called 'toxic securities' on bank balance sheets are in fact

risky and distressed but probably fundamentally undervalued assets

You believe that? James K. Galbraith says it's possible to get actual facts ex ante, rather than depending on the Invisible Hand to provide them ex post.

The central Treasury assumption, at least for public consumption, seems to be that the underlying mortgage loans will largely pay off, so that if the PPIP buys and holds, at an above-present-market price governed by auction, the government's loan to finance the purchase will not go bad.

Recovery rates on sub-prime residential mortgage-backed securities (RMBS) so far appear to belie this assumption. IndyMac lost $10.8 bn on a $15bn portfolio (and if you count the wipeout of equity, the total loss is about $12bn). That's an 80 percent loss. It's possible that recovery rates at other banks will be better, but how can we know? No one is examining the loan tapes.

The NYT article points out that pools of RMBS can be sold for about 30 cents on the dollar now. But banks are unwilling to sell for less than 60 cents — either because they really think the loans will experience only a 40 percent loss rate, or because they fear that acknowledging market value will put them into insolvency. Which it might very well.

The way to find out who is right is to EXAMINE THE LOAN TAPES. An independent examination of the underlying loan tapes — and comparison to the IndyMac portfolio — would help determine whether these loans or derivatives based on them have any right to be marketed in an open securities market, and any serious prospect of being paid over time at rates approaching 60 cents on the dollar, rather than 30 cents or less.

Note that even a small loss of capital, relative to the purchase price, completely wipes out the interest earnings on the Treasury's loans, putting the government in a loss position and giving the banks a windfall.

There are only three reasons I can see why one might not adopt Galbraith's suggestion:

  1. If one believes that the empirical evidence needed is not in fact on those tapes.
  2. If one believes that the empirical evidence needed may be on those tapes, but extracting and analyzing it would take so long that the crisis would deepen too much before one had the answer.
  3. If one is afraid to find out the truth because it will cause a Mad Max moment.

Ask yourself this: if the fund proposed by Geithner et al is so great, should we open it up to regular folks to invest? No? Why do you say that?

Posted in Econ & Money: Mortgage Mess | 6 Comments

Obama’s Vietnam?

There's a conventional wisdom about the Johnson administration that says, LBJ has all these great plans for domestic policy — Civil Rights, the Great Society — but he didn't understand foreign affairs nearly as well as he understood domestic policy. And the one thing he did understand is that the 50's had been dominated by witch hunts over who “lost China”. And the one thing LBJ knew is that he wasn't going to have the albatross of “losing Vietnam” hung around his neck. And thus the Best and the Brightest, the bombing, the escalation and all the rest of it.

Cut to the banking crisis.

Certainly the plan that Obama's economic team have come up with has all the hallmarks of coming from the used policy shop — Krugman even calls them 'zombie ideas' playing off the idea that we are propping up zombie banks.

Open Left's Department of Solving Problems Using the Same Thinking Used To Create Them has a fine roundup of the professional critiques. They seem pretty damning to me.

To the extent I can find defenders of the plan, they tend to make two points:

  • Team Obama is constrained by what can get through the Senate. The best ideas, bigger stimulus, nationalizing banks, or starting a set of new clean federal banks to pick up the financial slack, just won't get past the troglodyte GOP and their enablers like Lieberman, Nelson, and Bayh.
  • The bankers are running around in private saying that the sky will fall any day now, civilization will end, ATMs will dry up there will be riots in the streets, unless banks get massive donations to rescue their balance sheets. It's not true, but they may believe it, and their panic is contagious.

Both these points, especially the first, have merit, but not nearly enough to justify preemptive surrender that requires not only rewarding the massively guilty, but creating new entities filled with moral hazard in which the public takes only the bitter and never the sweet.

The Treasury's plan is just plan bad. I hope it will not be Obama's Vietnam.

Posted in Econ & Money: Mortgage Mess | 4 Comments